How PayPal’s New Refund Policy Is Killing Small Businesses

As has been exemplified by the recent purge of Bitcoin SV from Binance, Shapeshift, and other exchanges likely to follow suit, big changes happen when people have had enough.

That’s because what many platforms, products, services, institutions, and governments underestimate time and again is the person using their services. It’s that person, the client, who epitomizes everything there is to work toward, and everything that needs to be carefully tended to.

PayPal is the latest in a long line of such services who aren’t carefully tending to their clientele, and for that, they will one day find themselves on the back foot with the very people who currently constitute their business.

So, what has PayPal done to stir the ire of small business owners the world over who depend on their service to process payments?

PayPal Will Now Keep Sales Fees From Refunds

PayPal's new refund policy has sellers up in arms

It used to be the case that if you made a sale and your customer decided they wanted a refund, PayPal would refund everything, including the 3% sales fee it charges vendors. When May 7th, 2019 rolls around, that will no longer be true.

That’s because PayPal has revised their user agreement to lay permanent claim to the 3% sales fee, regardless of whether you refund the buyer or not. What makes the policy change so shocking is that if your customer asks for a refund, you’ll lose not only the client but also 3% of the sales amount paid to PayPal.

Imagine that you’ve just made a solid $500 sale, only to have the client ask for their money back. Ordinarily, this wouldn’t be much of a problem apart from the hassle and lost time. The $14.50 commission charged by PayPal, while steep, would normally head right back into your account.

With the change in policy, your wallet is going to be a lot lighter. The $14.50 you’d expect to receive back in the case of a refund is instead going to stay in PayPal’s account, not yours That means you’re coming out of the situation as the clear loser while PayPal and the customer run laps around you.

Sounds good? Of course not, but that isn’t going to stop PayPal from going through with the policy change anyway. It’s evident that the motivation is profit — after all, what other reason could there be for keeping the money. In this case, however, the cash-grab is so absurd that it verges on abuse.

Small Businesses Are Going to Feel the Pain

You might be wondering who this will affect, and how badly it’s going to hurt. The truth is, small businesses and individual retailers are going to get wiped out. There are several reasons behind this: some of them are plain and simple, while others are less obvious but even more malicious.

1. Basic economics— Going back to our example from the last section, how long do you think a small business is going to last once it starts getting hit with enough refund requests in what is, essentially, a refund economy? Amazon has set the stage for the expectation that items can be returned no matter what, no questions asked. Because of that, refund requests are happening at a much higher rate than ever before, and they won’t be slowing down any time soon. With PayPal holding onto commissions from here on out, the financial toll for small businesses is going to mount.
2. Big sellers can bully smaller ones — That’s right, large sellers are going to use the new PayPal policy to knock the competition out of the game. Pretend you’re a big seller with plenty of financial resources to play with. Some smaller sellers are biting into your profit margin, and you’d like nothing better than to monopolize the niche they’re selling into. So, what do you do? Well, you could…spam them with orders that you have no intention of keeping. Once the order is fulfilled, you simply request a refund and let the commissions rack up until the small seller has no option but to throw in the towel. How will the small seller protect themselves from rogue vendors like you? They can’t because they won’t know which orders are legit, and which aren’t.

I’m Not a Vendor, so Why Should I Care?

You may not be a vendor, but you’re going to feel the heat just the same. The reason is that every time a policy change encroaches into a business’ bottom line, it’s the customers who ultimately pay the price. To offset the losses to PayPal, vendors are going to have no other choice but to increase prices on their products to cover themselves and break even.

Not only will prices on products increase, but as less and less small vendors can compete, markets will become increasingly centralized, trending towards monopolies. The natural consequence of less price discovery is that the Amazon’s of the world will dictate prices as they wish. A centralized retail environment is terrible for everyone — except the handful of execs at the top of the food chain.

This scenario is an excellent demonstration of how intermediaries, especially when in a monopolistic position, can ruin it for everyone but themselves.

Particl Open Marketplace Is Giving Vendors a Fighting Chance

PayPal is proving in the most explicit terms possible that vendors who depend on their platform are not actually in control of their businesses. What’s a business owner to do?

If you don’t agree with these changes, you may close your account. — Paypal

Take a stand against PayPal and take your business back by transitioning to a platform that values your autonomy and has developed the tools you need to thrive.

Particl Open Marketplace is a decentralized platform for buying and selling goods and services online. It does not charge any fees, apart from an incredibly minuscule listing fee that amounts to a few cents — less than the change jingling around in your pocket. There’s also no central authority that can decide, on a whim, to force new, unfair rules on its users.

Moreover, as a buyer, you’ll have improved price discovery on Particl Open Marketplace. That’s because vendors on the platform won’t have to pass the fees they pay down on to you. Their savings become your savings since there is no one standing in the middle waiting to take a cut of the proceeds. With platform fees out of the equation, it then becomes evident what the true price of a product should be. Supply and demand.

Decentralized marketplaces are the next logical step as more people realize that intermediaries and third-parties are not only obsolete in light of the latest opportunities made possible by blockchain and P2P technologies, but expensive to maintain as well. Join the evolution of eCommerce by switching to Particl Open Marketplace — and let the intermediaries find themselves becoming lonelier by the day.